Negative Effect of Managerial Equity Ownership on Firm Performance: An Empirical Study on Listed Private Companies in Shanghai Stock Exchange

In this paper, we investigate the endogeneity of managerial ownership and the relationship between managerial ownership and firm performance based on the perspective of investment behavior. To minimize the non-market effect from state-owned ownership, we choose listed private companies as our sample instead of all listed companies in Shanghai A-share stock market. Through the two-stage least squares regression analysis of simultaneous equations on the panel data during 2004-2007, we confirm the endogeneity of managerial ownership. Furthermore, we find that managerial ownership has a negative effect on firm performance. These findings are valuable for implementation of equity incentive in state-owned listed companies.